Best Practices: Updated Guidance on SOP 50 10(5)(J)
UPDATE: This article has been revised to reflect clarification provided by SBA on determining whether a minimum equity injection is required for a partner buyout. On April 3, 2018 SBA issued Policy Notice 5000-17057. It provides guidance on different matters related to SOP 50 10 5(J) which became effective on January 1, 2018. Two significant ... Read More
Best Practices: Obtaining Assignment of Leases and Landlord Waivers under SOP 50 10 5(J)
SOP 50 10 5(J), Subpart B, Chapter 4 provides the following: When a substantial portion of the loan proceeds are to be used for leasehold improvements or a substantial portion of the collateral consists of leasehold improvements, fixtures, machinery, or equipment that is attached to leased real estate, the Lender should obtain: An Assignment of ... Read More
Best Practices: SBA Financing for Acquiring an ESOP-Owned Business
SBA loan proceeds are frequently used to finance change of ownership transactions. Such change of ownership can be accomplished through either a stock purchase (or redemption) or through a purchase of all or substantially all of the assets of the seller’s business.1 The SBA Standard Operating Procedure 50 10 5(J) (“SOP”) Subpart B requires that ... Read More
Best Practices: False Claims Act Liability and the need to make a “CLAIM”
We have written previously on the Small Business Administration’s increased use of the federal False Claims Act (“FCA”) against lenders who fail to follow the SBA’s Standard Operating Procedures (“SOPs”) in considering and underwriting loans that have gone into default and for which the lender has subsequently requested the SBA to purchase the guaranteed portion ... Read More
Best Practices: Equity Injection Requirements for Business Expansions
Lenders extending Small Business Administration (“SBA”) loans have now been operating under SOP 50 10 5 (J) since January 1, 2018. As most SBA lenders are aware, SOP 50 10 5 (J) included substantive changes to the SBA’s equity injection requirements for loans involving start-up businesses and/or changes of ownership. For a full discussion of ... Read More
Best Practices: Updated Guidance on SOP 50 10(5)(J) #2
On April 3, 2018 SBA issued Policy Notice 5000-17057. It provides guidance on different matters related to SOP 50 10 5(J) which became effective on January 1, 2018. Two significant matters addressed in the Policy Notice are modifications to (i) Credit Elsewhere analysis for owners (their spouses and their minor children) of the Applicant and ... Read More